It's a little funny to think that railroad giant Union Pacific (UNP) is a Rocket Stock this year. After all, compared with a technology innovator such as Juniper Networks, trains feel like stone age tech. But dig a little deeper, and UNP paints a very different picture. Not only are the big macro trends pointing in this railroad's favor in 2014, but Union Pacific is also delivering record financial performance right now.
Here's why now is the time to take advantage.
Union Pacific is the largest railroad in North America, with around 32,000 miles of track spread across 23 U.S. states, Canada, and Mexico. Railroads may not be new technology, but their efficiency is hard to argue with. Particularly with oil prices sitting at the high end of their historic range, U.S. rail transport is an exceptionally efficient means of moving massive volumes of freight across the country. Compared with trucks, rail shipping generally costs around one-fourth as much per ton shipped, so as higher oil costs get forecasts in years ahead, shippers become much more willing to ship via rail freight.
Last week, UNP announced that 2013 was a year of record revenues and profitability for the firm, tacking another $2 billion of post-dividend free cash flow onto its balance sheet. Railroads may not be the sexiest industry for 2014, but it could be one of the most profitable for investors.